Market Overview

Daktronics, Inc. Announces Fiscal Year and Fourth Quarter 2020 Results

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BROOKINGS, S.D., June 10, 2020 (GLOBE NEWSWIRE) -- Daktronics, Inc. (NASDAQ - DAKT) today reported fiscal year and fourth quarter 2020 results.  Daktronics reported fiscal year 2020 net sales of $608.9 million, operating loss of $0.2 million, net income of $0.5 million, and earnings per diluted share of $0.01.  This compares to net sales of $569.7 million, operating loss of $4.7 million, and net loss of $1.0 million, or $0.02 per diluted share for fiscal 2019.  Fiscal 2020 orders were $620.8 million compared to $608.9 million for fiscal 2019.

Daktronics reported fiscal 2020 fourth quarter net sales of $126.1 million, operating loss of $3.5 million, and net loss of $1.1 million, or $0.02 per diluted share, compared to net sales of $127.8 million, operating loss of $10.3 million, and net loss of $10.8 million, or $0.24 per diluted share, for the fourth quarter of fiscal 2019.  Fiscal 2020 fourth quarter orders were $147.2 million compared to $162.5 million for the fourth quarter of fiscal 2019.  Product backlog at the end of the fiscal 2020 fourth quarter was $212 million, compared to a backlog of $202 million a year earlier and $187 million at the end of the third quarter of fiscal 2020.

Cash flow provided by operating activities for the fiscal year ended May 2, 2020 was $10.8 million, compared to $29.5 million in fiscal 2019.  Free cash flow, defined as cash provided from or used in operating activities less net investment in property and equipment, was a negative $7.0 million for fiscal 2020, as compared to a positive free cash flow of $12.9 million for fiscal 2019.  Net investment in property and equipment was $17.8 million for fiscal 2020, as compared to $16.7 million for fiscal 2019.  Cash, restricted cash, and marketable securities at the end of the fourth quarter of fiscal 2020 were $41.6 million, which compares to $62.1 million at the end of the fourth quarter of fiscal 2019.  At the end of fiscal year 2020, we had $15 million borrowed on our line of credit.

Fourth Quarter Fiscal 2020 Consolidated Financial Results
Orders for the fourth quarter of fiscal 2020 decreased 9.4 percent as compared to the fourth quarter of fiscal 2019.  Orders increased in the Live Events, High School Park and Recreation, and Transportation business units and decreased in the Commercial and International business units.  The increase in the Live Events business unit was due to an increase in the number projects for professional sports stadiums and arena venues.  Transportation orders grew due to increased state procurement project activity.  The Commercial and International business units observed a decrease in orders mainly in the out-of-home ("OOH") market as advertising spend contracted due to the COVID-19 pandemic.  The volatility of order timing for large projects and global accounts varies according to the needs of the customer and is the primary cause of the change in order volume.

Net sales for the fourth quarter of fiscal 2020 decreased by 1.3 percent as compared to the fourth quarter of fiscal 2019.  Net sales increased in the Live Events, High School Park and Recreation, and Transportation business units and decreased in the Commercial and International business units.  The change in sales primarily relates to fluctuations in the timing of order bookings, and related conversion to sales, including some shipping and onsite delays caused by COVID-19.

Gross profit as a percentage of net sales was 22.7 percent for the fourth quarter of fiscal 2020 as compared to 19.1 percent a year earlier.  The increase in gross profit percentage was primarily due to lower personnel related costs as we adjusted for reduced demand during COVID-19 stay at home orders, the non-recurrence of a business combination charge in the fourth quarter of fiscal 2019 and lower warranty charges.  Warranty as a percent of sales improved to 1.6 percent of sales as compared to 2.2 percent last year.  Operating expense for the fourth quarter of 2020 was $32.1 million, compared to $34.7 million for the fourth quarter of fiscal 2019.  Operating loss as a percentage of sales was 2.7 percent for the fourth quarter of fiscal 2020 as compared to an operating loss as a percentage of sales of 8.0 percent for the fourth quarter of fiscal 2019.

The provision for income taxes during the fourth quarter of our fiscal reporting period is calculated based on actual results for the full fiscal year to income or loss, excluding unusual or infrequently occurring discrete items for the reporting period.  Our effective tax rate was 66.9 percent and negative 1.3 percent for the fourth quarter of fiscal 2020 and fiscal 2019, respectively.

Fiscal 2020 Consolidated Financial Results
Orders for fiscal 2020 increased by 2.0 percent as compared to fiscal 2019.  Orders increased in the Live Events, High School Park and Recreation, and Transportation business units and decreased in the Commercial and International business units.  Live Events orders increase was primarily due to the increase in the number of projects for college and university venues, minor league and professional sports stadiums, and arena venues.  Transportation orders grew as demand for intelligent transportation systems increased as state transportation departments and private public partnerships continue to invest in technology to better inform travelers, manage transport systems, and collect revenues.  Commercial orders decreased primarily due to a decrease of orders in our spectacular and OOH markets.  International business unit orders were down primarily due to timing of large orders and the delay of orders due to COVID-19.  Each business unit's orders were impacted by the additional week in fiscal 2020.

Net sales for fiscal 2020 increased 6.9 percent as compared to fiscal 2019.  Net sales increased in the Commercial, Live Events, High School Park and Recreation, and Transportation business units and remained relatively flat in the International business unit.  This change in sales correlates to order levels noted above, the additional week in fiscal 2020, and to the timing of converting orders and backlog into sales.  The timing of order conversion is based on customer driven delivery schedules.

Gross profit as a percentage of net sales was 22.8 percent for fiscal 2020 as compared to 22.9 percent a year earlier.  Warranty as a percent of sales improved to 1.9 percent of sales as compared to 2.3 percent last year.  Operating expenses for fiscal 2020 were $138.9 million as compared to $135.0 million for fiscal 2019.  The increase in total operating expenses was primarily attributable to an increase in selling and product development expenses.  Operating margin improved to breakeven as a percent of sales for fiscal 2020 as compared to a loss of 0.8 percent for fiscal 2019.

Our fiscal 2020 tax benefit is the result of permanent tax credits exceeding a valuation allowance.  The effective tax rate  for fiscal 2019 was 80.6 percent and significantly different from the current year as the fiscal 2019 effective income tax rate was impacted by one-time discrete adjustments of $3.2 million for the release of valuation allowances and unrecognized tax benefits.

Reece Kurtenbach, chairman, president and chief executive officer, stated, "As we entered into fiscal 2020, we focused on winning more orders through existing and new markets and sales channels, developing and deploying newly designed solutions and advanced manufacturing techniques, and managing capacity and spend.  We achieved these goals.  Our investments in technology yielded additional features in our control systems and broadened our lineup of displays which contributed to the second highest level of order volume in our company's history.  This order level is a testament of our continued leadership in the marketplace as customers choose Daktronics for our broad range of solutions, the reliability of our products, and our commitment to serve them over the lifetime of their system.  Significant projects for fiscal 2020 included Texas Rangers where we provided a complete audiovisual control solution throughout the park and at the San Jose Airport where we provided displays for the nation's first all-digital airport advertising network.

"To support our long-term technology advancement strategies, we participated in a Series A investment in X Display Company ("XDC").  XDC creates and owns leading intellectual property and capabilities in microLED mass transfer technology.  This investment supports our line of narrow pixel pitch LED displays and will enable solutions to move into the realm of less than 1-millmeter pixel spacing."

Outlook
Kurtenbach continued, "In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic, and in the following weeks, many countries and U.S. states and localities issued lock down orders impacting businesses globally.  Like many other companies, the pandemic and related social reactions have impacted our business and have created an unprecedented and challenging time.  Our growth-oriented focus of investing in the development of sales channels and new products for long-term success has turned to reacting to the new near-term realities of this uncertain business environment.  We have taken actions to reduce costs and to focus on key priorities to position ourselves for a strong recovery when the crisis is over.  However, the ensuing depth and length of impact to the economy and our customers reactions to the environment create uncertainties predicting fiscal 2021 opportunities.

"The market's increasing adoption and use of digital solutions, along with our new technology releases, cause us to remain positive on the overall future of our business and growth in the industry."

Webcast Information
The company will host a conference call and webcast to discuss its financial results today at 10:00 am (Central Time).  This call will be broadcast live at http://investor.daktronics.com and be available for replay shortly after the event.

About Daktronics
Daktronics has strong leadership positions in, and is the world's largest supplier of, large screen video displays, electronic scoreboards, LED text and graphics displays, and related control systems.  The company excels in the control of display systems, including those that require integration of multiple complex displays showing real-time information, graphics, animation, and video.  Daktronics designs, manufactures, markets and services display systems for customers around the world in four domestic business units:  Live Events, Commercial, High School Park and Recreation and Transportation, and one International business unit.  For more information, visit the company's website at: www.daktronics.com, email the company at investor@daktronics.com, call (605) 692-0200 or toll-free (800) 843-5843 in the United States, or write to the company at 201 Daktronics Dr., P.O. Box 5128, Brookings, S.D. 57006-5128.

Safe Harbor Statement
Cautionary Notice: In addition to statements of historical fact, this news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and is intended to enjoy the protection of that Act.  These forward-looking statements reflect the Company's expectations or beliefs concerning future events.  The Company cautions that these and similar statements involve risk and uncertainties which could cause actual results to differ materially from our expectations, including, but not limited to, changes in economic and market conditions, management of growth, timing and magnitude of future contracts, fluctuations in margins, the introduction of new products and technology, the impact of adverse weather conditions, and other risks noted in the company's SEC filings, including its Annual Report on Form 10-K for its 2019 fiscal year.  Forward-looking statements are made in the context of information available as of the date stated.  The Company undertakes no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur.

For more information contact:    
INVESTOR RELATIONS:    
Sheila Anderson, Chief Financial Officer    
(605) 692-0200    
Investor@daktronics.com    
     


Daktronics, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share amounts) (unaudited)
       
  Three Months Ended   Twelve Months Ended
  May 2,
 2020
  April 27,
 2019
  May 2,
 2020
  April 27,
 2019
Net sales $ 126,108     $ 127,755     $ 608,932     $ 569,704  
Cost of sales 97,482     103,334     470,232     439,410  
Gross profit 28,626     24,421     138,700     130,294  
               
Operating expenses:              
Selling 14,876     16,608     65,902     64,648  
General and administrative 8,495     9,132     35,193     34,817  
Product design and development 8,709     8,946     37,772     35,557  
  32,080     34,686     138,867     135,022  
Operating loss (3,454 )   (10,265 )   (167 )   (4,728 )
               
Nonoperating income (expense):              
Interest income 141     318     805     1,031  
Interest expense (53 )   (74 )   (106 )   (160 )
Other (expense) income, net 111     (664 )   (541 )   (1,087 )
               
Loss before income taxes (3,255 )   (10,685 )   (9 )   (4,944 )
Income tax (benefit) expense (2,176 )   134     (500 )   (3,986 )
Net (loss) income $ (1,079 )   $ (10,819 )   $ 491     $ (958 )
               
Weighted average shares outstanding:              
Basic 44,685     45,139     45,031     44,926  
Diluted 44,685     45,139     45,316     44,926  
               
Earnings (loss) per share:              
Basic $ (0.02 )   $ (0.24 )   $ 0.01     $ (0.02 )
Diluted $ (0.02 )   $ (0.24 )   $ 0.01     $ (0.02 )
               
Cash dividends declared per share $ 0.05     $ 0.07     $ 0.20     $ 0.28  



Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands) (unaudited)
       
  May 2,
 2020
  April 27,
 2019
ASSETS      
CURRENT ASSETS:      
Cash and cash equivalents $ 40,398     $ 35,383  
Restricted cash 14     359  
Marketable securities 1,230     26,344  
Accounts receivable, net 72,577     65,487  
Inventories 86,803     78,832  
Contract assets 35,467     33,704  
Current maturities of long-term receivables 3,519     2,300  
Prepaid expenses and other current assets 9,629     8,319  
Income tax receivables 548     1,087  
Property and equipment and other assets available for sale 1,817     1,858  
Total current assets 252,002     253,673  
       
Property and equipment, net 67,484     65,314  
Long-term receivables, less current maturities 1,114     1,214  
Goodwill 7,743     7,889  
Intangibles, net 3,354     4,906  
Investment in affiliates and other assets 27,683     5,052  
Deferred income taxes 13,271     11,168  
TOTAL ASSETS 372,651     349,216  
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
CURRENT LIABILITIES:      
Accounts payable 47,834     44,873  
Contract liabilities 50,897     47,178  
Accrued expenses 36,626     32,061  
Warranty obligations 9,764     9,492  
Income taxes payable 844     468  
Total current liabilities 145,965     134,072  
       
Long-term warranty obligations 15,860     14,978  
Long-term contract liabilities 10,707     10,053  
Other long-term obligations 22,105     1,339  
Long-term income tax payable 582     578  
Deferred income taxes 452     533  
Total long-term liabilities 49,706     27,481  
TOTAL LIABILITIES 195,671     161,553  
       
SHAREHOLDERS' EQUITY:      
Common stock 60,010     57,699  
Additional paid-in capital 44,627     42,561  
Retained earnings 85,090     93,593  
Treasury stock, at cost (7,470 )   (1,834 )
Accumulated other comprehensive loss (5,277 )   (4,356 )
TOTAL SHAREHOLDERS' EQUITY 176,980     187,663  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 372,651     $ 349,216  
       



Daktronics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands) (unaudited)
     
    Year Ended
    May 2,
 2020
  April 27,
 2019
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income (loss)   $ 491     $ (958 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:        
Depreciation and amortization   17,718     18,635  
Gain on sale of property, equipment and other assets   (35 )   (441 )
Share-based compensation   2,265     2,479  
Contingent consideration adjustment       286  
Equity in loss of affiliate   741     844  
Provision for doubtful accounts   (99 )   194  
Deferred income taxes, net   (2,183 )   (3,379 )
Change in operating assets and liabilities   (8,090 )   11,886  
Net cash provided by operating activities   10,808     29,546  
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchases of property and equipment   (18,091 )   (17,268 )
Proceeds from sales of property, equipment and other assets   322     607  
Purchases of marketable securities       (25,337 )
Proceeds from sales or maturities of marketable securities   25,162     33,706  
Purchases of and loans to equity investment   (11,664 )   (1,300 )
Acquisitions, net of cash acquired       (2,250 )
Net cash used in investing activities   (4,271 )   (11,842 )
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Borrowings on notes payable   15,000      
Principal payments on long-term obligations   (2,149 )   (450 )
Dividends paid   (8,994 )   (12,554 )
Proceeds from exercise of stock options       1,318  
Payments for common shares repurchased   (5,636 )    
Tax payments related to RSU issuances   (199 )   (246 )
Net cash used in financing activities   (1,978 )   (11,932 )
         
EFFECT OF EXCHANGE RATE CHANGES ON CASH   111     215  
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH   4,670     5,987  
         
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:        
Beginning of period   35,742     29,755  
End of period   $ 40,412     $ 35,742  
         



Daktronics, Inc. and Subsidiaries
Net Sales and Orders by Business Unit
(in thousands) (unaudited)
       
  Three Months Ended   Twelve Months Ended
  May 2,
 2020
  April 27,
 2019
  Dollar
Change
  Percent
Change
  May 2,
 2020
  April 27,
 2019
  Dollar
Change
  Percent
Change
Net sales:                              
Commercial $ 32,061     $ 35,036     $ (2,975 )   (8.5 )%   $ 152,627     $ 148,833     $ 3,794     2.5 %
Live Events 37,395     36,386     1,009     2.8     196,591     170,952     25,639     15.0  
High School Park and Recreation 20,981     16,689     4,292     25.7     96,414     91,187     5,227     5.7  
Transportation 16,875     13,767     3,108     22.6     70,139     64,391     5,748     8.9  
International 18,796     25,877     (7,081 )   (27.4 )   93,161     94,341     (1,180 )   (1.3 )
  $ 126,108     $ 127,755     $ (1,647 )   (1.3 )%   $ 608,932     $ 569,704     $ 39,228     6.9 %
Orders:                              
Commercial $ 27,123     $ 38,955     $ (11,832 )   (30.4 )%   $ 146,182     $ 162,592     $ (16,410 )   (10.1 )%
Live Events 54,373     50,414     3,959     7.9     203,834     179,217     24,617     13.7  
High School Park and Recreation 26,236     24,211     2,025     8.4     100,088     98,139     1,949     2.0  
Transportation 28,063     18,323     9,740     53.2     83,473     73,059     10,414     14.3  
International 11,374     30,582     (19,208 )   (62.8 )   87,201     95,873     (8,672 )   (9.0 )
  $ 147,169     $ 162,485     $ (15,316 )   (9.4 )%   $ 620,778     $ 608,880     $ 11,898     2.0 %


Reconciliation of Cash Flow Provided by Operating Activities to Free Cash Flow
(in thousands) (unaudited)
   
  Twelve Months Ended
  May 2,
 2020
  April 27,
 2019
Net cash provided by operating activities $ 10,808     $ 29,546  
Purchases of property and equipment (18,091 )   (17,268 )
Proceeds from sales of property, equipment and other assets 322     607  
Free cash flow $ (6,961 )   $ 12,885  

In evaluating its business, Daktronics considers and uses free cash flow as a key measure of its operating performance.  The term free cash flow is not defined under U.S. generally accepted accounting principles ("GAAP") and is not a measure of operating income, cash flows from operating activities or other GAAP figures and should not be considered alternatives to those computations.  Free cash flow is intended to provide information that may be useful for investors when assessing period to period results.

 

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